Carbon tax going, but don't expect big savings

The carbon tax will be repealed within days after a breakthrough in talks between the government and cross bench senators who were concerned at what they believed were draconian provisions in the repeal bill.

An amended bill will be presented to the Senate and the House of Representatives as soon as Monday.

Liberal Democrat senator David Leyonhjelm and Family First senator Bob Day told the government on Friday they were prepared to walk away from the bill if it continued to include provisions that penalised small businesses that didn't pass on any savings.

"No one wanted the carbon tax gone more than I did," Senator Day said. "But we couldn't have had those provisions in there. They would have been worse than the tax."

LDP Senator David Leyonhjelm. Picture: ALEX ELLINGHAUSEN

Describing the penalties as "way over the top" and "just draconian" Senator Day said Environment Minister Greg Hunt agreed to remove them on Saturday.

"He sent the amendments through and they are fine,'' he said. "The penalties will now only apply to the 60 or so major energy suppliers. They are big enough and ugly enough to look after themselves."

On Monday, Senator Leyonhjelm warned the government not to cave into Palmer United Party leader Clive Palmer is his party wanted more last-minute amendments, saying Mr Palmer should wear the political consequences of blocking the repeal.

‘‘What I do have concerns about is whether Mr Palmer is acting in the best interests of ... Australia,’’ he told ABC radio.

Mr Hunt said he had had "electronic engagement" with the crossbenchers over the weekend and had offered "some minor edits" to ensure any unintended consequences for businesses were removed.

"I know from my discussions with the Palmer team that they don't want to put impositions on small business," he told Fairfax radio.

"I expect that by the end of the week it will done and dusted and everybody will have lower electricity bills from Friday onwards."

A source close to Clive Palmer said although the amendments looked fine it would be up to Mr Palmer himself to approve them. He is holidaying in New Zealand. Independent senator Nick Xenophon said he would read them carefully before deciding how to vote.

The legislation is backdated to July 1, meaning some customers will get partial refunds on their electricity bills.

But they are unlikely to save anything like the $550 claimed by Prime Minister Tony Abbott at the Queensland Liberal National Party convention at the weekend.

"It's adding 9 per cent to your power bills, it's a $9 billion handbrake on our economy and it's costing average Australian families $550 a year," Mr Abbott said, referring to the carbon tax. "So it must go."

The $550 figure comes from Treasury modelling ahead of the introduction of the tax in 2012. But only $250 of it came from electricity and gas prices. The rest came from much smaller imposts on items such as food ($46) clothing ($29) and rent ($23). Many of the items modelled by the Treasury had price impacts described as "less than 10 cents per week".

The latest iteration of the legislation will include no penalties for businesses who don't pass their energy savings on, making a one-off saving of $250 per household more likely.

"I think that's an overestimate,” Climate Institute chief executive John Connor said on Sunday. "Gas prices are climbing sharply for reasons unconnected with the carbon tax, so it's unlikely there will be any cut in the gas price".

Australia's largest supermarket chain, Woolworths, has said that because it avoided price rises when the carbon tax was introduced there would be little room to remove them when it came off.

Coles says it is "working with suppliers to understand the implications of the change and if we identify any savings attributable to the tax changes we will pass them back to our customers".

Qantas has removed the carbon surcharge on domestic flights but says market conditions do not allow it reduce its standard fares.

Senator Cormann maintained that households would be $550 a year better off after the tax was repealed despite the Treasury modelling, saying that electricity costs flow through the whole economy and savings from scrapping the carbon tax would reach consumers.

Mr Connor said there should be a review, before repeal, of the real price impacts and benefits. It should be conducted by the independent Climate Change Authority chaired by the former head of Reserve Bank Bernie Fraser.

A bill to abolish the Climate Change Authority also comes up for debate on Monday along with an amendment from Palmer United senators that would enable it to recommend a move to an emissions trading scheme when enough other countries came on board.